Should I Pay Off My Credit Card if I Have a Pending Return?

How Do Credit Card Refunds Work?

When you make a purchase with a credit card, your credit card issuer pays the merchant on your behalf. When you want to return an item, merchants will generally refund the purchase to the card you used in the initial transaction. However, the return and credit card refund process can depend more on a merchant’s terms and conditions than the credit card you use.

For example, some merchants might offer to give you cash if you’re returning an inexpensive product. Or, you might be able to get store credit rather than have the purchase refunded to your credit card. But often, the money gets sent back to your credit card. And when the merchant issues a refund to your credit card company, the amount gets applied to your account as a statement credit.

Returns vs. Chargebacks

If you change your mind or have an issue with a product or service you bought, your first course of action should be to reach out to the merchant for a refund or replacement. However, if a merchant hasn’t delivered the product or service as promised—and they’re not giving you a refund—you can file a dispute with your credit card issuer.

The card issuer will investigate your claim, and you could get your money back. These disputes and the resulting chargebacks can also help you if someone fraudulently uses your card. Unlike with a return, you typically won’t have to pay the bill for the disputed amount, or interest on that amount, while the card issuer performs its investigation. (It’s still a good idea to confirm with your card issuer that you don’t have to make a payment, however.)

How Long Do Credit Card Refunds Take?

A refund may appear in your credit card account within a few days of the merchant approving your return and authorizing the refund. But the overall timeline can depend on how you return an item and the merchant’s policies.

For example, the merchant might authorize the refund immediately if you return an item at a store. If you have to ship it back, you may need to wait for the merchant’s returns department to receive and process the shipment. If you know the package arrived at their warehouse and are waiting on a refund, you could try to call customer service to see if you can get the money back faster.

Should You Pay Your Bill in Full if You’re Waiting for a Refund?

It’s best to pay your credit card bill in full to avoid paying interest on your purchases. When you pay less, you’ll carry a balance to the next billing period and your new purchases will start to accrue interest immediately. If you start fresh every month, you’ll be able to take advantage of a grace period during which interest charges don’t apply.

The same rules apply even if you know a refund is coming. If you make and return a purchase during the same billing cycle, the statement credit could lower your statement balance before you receive a bill—which decreases how much you owe. However, if your billing cycle ends before the refund is applied, your minimum payment and statement balance may be locked in place.

The statement credit will then go toward your current balance to offset new purchases, or your account can go negative. When that happens, you can ask the issuer to transfer the money to your bank account or to send you a check.

If you can’t afford a full payment and are waiting on a refund, you should still try to make your minimum payment to avoid a late payment fee and a late payment from hurting your credit scores. If you were charged interest or a fee and received the refund soon after, it doesn’t hurt to call the issuer and see if they can reverse the fee and interest charges. Although they’re not required to make any changes, some card issuers might be willing to help.

The Bottom Line

You’re borrowing money from your card issuer whenever you use your card. Even if you return a purchase, you need to repay your loan while you wait for a refund. Having good credit can give you more options and lower interest rates whenever you have to borrow money. Check your Experian credit report and credit score for free, and learn how to improve your score to get the best offers.